The World After GDP, by Lorenzo Fioramonti

The book that I have been writing with Katherine Trebeck has been out for expert review recently. One of the people who has read it is Lorenzo Fioramonti, a professor of political economy and an expert in GDP and its limitations. Our draft was returned to us with lots of helpful comments and several notes in the margins saying ‘see my book’. So I did.

The World After GDP is a study of how gross domestic product has become our leading national metric of success, how it became institutionalized, and how it distorts the economy and society. It’s “an analysis of how our politics and economics have been affected by the GDP-based narrow definition of growth and how the future may need us to re-conceptualize growth and progress in a way that is compatible with our aspirations and challenges in the 21^st century.”

GDP was developed in the US in the early thirties, and calculated and presented for the first time in 1934. It helped the Hoover administration to monitor the progress of the New Deal, and see if it was stimulating the economy the way it was supposed to. Then it was used to manage the US economy during the Second World War. It became embedded internationally during the post-WW2 reconstruction efforts and the formation of the Bretton Woods institutions.

This gave GDP an institutional power. It came to define development and success, and dictated countries’ positions in the world. The most powerful countries, measured according to GDP, are privileged with seats at the G7 or with more votes in international bodies. Since it carries prestige, governments are rewarded for high GDP. When deciding new policies, they are assessed for their impact on growth, and the quarterly figures are watched obsessively.

And yet, GDP ignores huge swathes of human lived experience. Nothing that is provided for free is counted, no matter how important it is – from home-cooked meals to childcare or housework. It is impossible to measure outcomes of spending, only the spending itself. There is no regard for quality of growth, and there is no way to count what is lost in the process of growth. Chop down a forest and it registers as pure gain on the GDP ledger, even though a forest is lost in the process.

The shortcomings of GDP have always been known, but the tensions get more stark every year. GDP doesn’t capture the digital revolution well, nor the sharing economy that has developed around it. The externalities keep mounting up, especially climate change. More and more people are questioning GDP, or at least wondering if we should be complementing it with some other measures of success.

That has created a moment for change, Fioramonti argues. He sees a ‘sandwich’ of with big reforms in one direction (the Sustainable Development Goals, the Paris Agreement, etc) and grassroots challenges from the other (new business models, community action, environmental movements) squeezing GDP dominance in the middle. As new metrics reach the mainstream, they will recalibrate our measures of success and release a ‘cascade’ of change through the system.

The book outlines how this change might happen, and the kind of economic and political governance that might emerge in that post-GDP world. It explores new forms of work, regionalism, the role of money, implications for global trade, and much more. You may have read about these things before, but Fioramonti brings them together into a coherent story about how ideas hold power, and how new ideas can have a domino effect. “The matching of top-down reforms and bottom-up pressures through post-GDP indicators, with the aid of new technologies, is opening an historic opportunity to change the world.”